Parents can build a tax-free nest egg for when children reach 18-years-old with a
new junior ISA.
The proposed ISA will be open to around six million children from November 1.
Parents run the account that locks up to £3,000 a year savings until the child hits
18 – then the funds are automatically transferred in to an adult ISA.
Financial Secretary to the Treasury, Mark Hoban has published draft regulations
detailing how the new tax-free children’s savings accounts or ‘junior ISAs’ will
work:
Government proposals for Junior ISAs are:
§ Junior ISAs will be available from the 1 November 2011
§ Children can have one cash plus one stocks and shares junior ISA at any time,
with an overall annual contribution limit of £3,000
§ Junior ISAs will be offered by high-street banks, building societies, and any
other providers that currently offer standard ISAs
§ Funds in junior ISAs will be ‘locked in’ until the child is 18, and the accounts
will then, by default, become adult ISAs
Mark Hoban said: “Junior ISAs are a great example of a simple, clear and jargon-
free financial product that allows families to save and invest for their child’s
future. They allow parents and family friends to contribute to children’s savings
and will strengthen the savings culture. I look forward to seeing these on the
high street in a few months time”
Although welcomed by investment houses, banks and building societies, some
industry experts are critical of the lack of government contributions to top-up
the ISAs.
“This is the rich man’s child trust fund – with the Government no longer making
contributions only the wealthy or well-off will be in position to take advantage,“
said Stefan Maryniak, savings expert at uSwitch.com.
“If the new junior ISAs live up to expectations, parents will be able to save nearly
three times as much each year on behalf of their children as they could in a child
trust fund. Inevitably some parents will see this as a way of boosting their own
tax-free savings, but for many others it will be a tax efficient way of saving for
future university fees, or to provide their child with a nest egg.“
